Italian oil and gas group Eni SpA (E) has inked an agreement with Amorim Energia B.V. and Caixa Geral de Dep?sitos, S.A. (“CGD”), to divest 5% of its interest in Portuguese energy group — Galp Energia SGPS, S.A. to Amorim Energia. Currently, Eni holds a 33.34% stake in Galp.
Amorim Energia needs to exercise the purchase option within 150 days. Though financial details were not disclosed by the company, the stake is estimated to cost around EUR520 million ($390.9 million) at current market prices.
Per the earlier agreement between the three parties – Eni, Amorim Energia and CGD, Eni was barred from abandoning its holding in Galp until April 2014. However, the revised agreement will release Eni from the clauses of the shareholder agreement prepared earlier between the three companies.
Moreover, Eni now has the right to offload the remaining part of its ownership. The company plans to offload its stake in various steps. Eni’s current right to sell 18% could likely rise by 2%, depending on the issuance of convertible bonds, out of the share capital of Galp Energia in the market.
Upon further sale, Amorim Energia would have the privilege to buy another 5% holding. Amorim Energia will also have the first right to purchase the remaining 5.34% holding of Eni. If Amorim Energia chooses not to exercise its option, the company can choose a third party to purchase the 10.34% holding.
Eni and Amorim Energia both have a holding of 33.34% each in Galp Energia while CGD has a 1% interest.
Eni’s endeavour to maximize value of shareholders is evident from its constant efforts to adjust its portfolio to include attractive markets that offer desirable returns.
Eni holds a Zacks #3 Rank, which translates into a Hold rating for a period of one to three months. For the long term, we remain Neutral on the company. Eni faces competition from Statoil ASA (STO) and Chevron Corporation (CVX).
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